Bryan:
Hello and welcome back to Change and the Market, your weekly look at the changing real estate market. I'm your host, Bryan, joined as always by my other host, Mr. Chris Masiello. Chris, how are you doing today?
Chris:
Good to be with you. Good to be with everyone in our community.
Bryan:
Absolutely. Let's get right into it. Chris, how have things changed in the market over the past week?
Chris:
Interesting week—I think a continuation of what we talked about last week. So, we're talking about cycles now. And the cycle for the raising of interest rates is coming to an end. The Federal Reserve meets today.
They might raise rates another quarter of a point—more maybe of a face-saving measure. However, I think with what's happening—with some instability in the banking system and all that—you'll start to see the Fed start to roll rates back. So I think now, we've been coming out of like this one-year rate-increase cycle.
I think we would be going into a rate-decrease cycle. And just to cover what we were talking about last week, when we talk about the Federal Reserve—when they raise rates, they're really not raising rates directly on the consumer; they're raising rates on the banks as they borrow money from the Federal Reserve.
So the cost of borrowing for the banks has gone up, which then, of course, gets passed off to the consumer. But what's happened is that you just had this soup of the stock market going down and bank stock—because if you're a publicly traded bank, the value of your bank actually went down because the stock market went down—and then all of the sudden it's costing you more money to borrow.
And now, you're having to pay out higher interest rates on the cash deposits you have on hand. So I think the aggressiveness of the Federal Reserve and raising interest rates—it's been a big question mark for a lot of us. Like, well, this doesn't really make a lot of sense. I think it's coming home to roost, that it really hasn't made a lot of sense.
I think we're going to start to see that get pulled back. So what does that mean for us? I think what it means for us is that we'll see a better interest rate environment. And it's interesting how markets behave, because what we're seeing is greater affordability because prices haven't gone up as much. They haven't gone down.
But you know, in '19, '20, and '21, we had 20% increases in pricing or 15 to 20%, depending on the market. And that's not really sustainable. So in this last year, as rates went up, in one way it affected affordability. But in this other way—which always fascinates me how markets react—housing appreciation was down in the low single digits.
And that's become enough of a breather for the marketplace for affordability. So now we've got a year where we took kind of a break from double-digit appreciation and now interest rates are coming down. And I think—just like what you and I have been talking about in recent weeks—this market is going to take off like a shot.
Multiple offers—depending on the property, depending on where you are. We're still seeing multiple offers. I think they're going to come back to being a thing soon. And I think we'll see more inventory on the market because, for a seller, interest rates come down. If you're a seller, you have to replace what you're selling in most cases.
So now I think people can start to see the window based on a lower-rate environment and a little bit better pricing—not because pricing has gone down, but because of the fact that we just haven't had as much appreciation in the last 14 months, 15 months, something like that.
Bryan:
So it kind of sounds like what you're saying, to me at least, is that we're heading into some uncharted territory here, which I think brings us to our final topic: What is your advice for everybody this week about this uncharted territory?
Chris:
Well, this is really uncharted territory. It's kind of exciting that way. Of course, I'm a little bit of an oddball when it comes to change—I like it. But yeah, it is uncharted territory. I was just doing some research last night, to prep for the call. Out of all the home sales in the United States—in the last 12-month cycle, there's been 4.6 million home sales—only 2% of them were foreclosures.
And there was all this hype, like, "Well, I'm going to wait until the housing market's going to crash and then I'm going to buy a foreclosure cheap." That speaks to me about really how resilient this housing cycle is.
And so this IS all change. And I think what we can take away from an environment like this is that it's a pretty good reminder that change is our one companion that's with us all the time—never takes a break. It is glued to our hips. And just when you think that something's not possible or you've never seen something before, well—here you go.
Bryan:
Surprise.
Chris:
And just to reverse that on you—don't be surprised. Don't be surprised because change is our constant companion, but it can be an ally if you let it be. And I think when you're taking a look at where were we a year ago, you know—gee whiz, rates are going up, this is awful, blah, blah, blah.
Well, what happened was, we got a pause in the market. Affordability now has been able to build up. There's pent-up demand. It's a healthier environment where rates will start to roll back. We're already seeing rates predominantly under six. We'll be probably mid to low fives in another, I don't know, 30 days—something like that.
And so if we let it, change could be a really positive influence on us, if we don't resist it too much.
Bryan:
Absolutely love the optimistic vibes you're putting out this morning, Chris. Absolutely. Good stuff. Great advice, as always. That's going to do it for this week's episode of Change and the Market. If you're enjoying our show, make sure you follow us or subscribe to us on whatever platform you're watching or listening on. Make sure you join us back here next week for another brand-new episode of Change and the Market.
Chris:
All right, folks, have a great week. Take care.
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